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tv   Mad Money  CNBC  February 6, 2012 11:00pm-12:00am EST

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 i'm jim cramer, and welcome to my world. >> you need to get in the game! firms are going to go out of business and he's nuts, they're nuts! they know nothing. i always like to say there is a bull market somewhere. "mad money," you can't afford to miss it. hey, i'm cramer. welcome to "mad money." welcome to cramerica. other people want to make friends, i'm just trying to save you some money. my job is not just to entertain you but to educate and teach you. so call me at 1-800-743-cnbc. sometimes stocks seem to make no sense, exploding upwards, regardless of the market or the latest news. take today where the dow sank 17 points, s&p gave up .04%. subdued day. over greece, worried about a
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market that's run too far too fast. then we saw a bizarre move in green mountain coffee, netflix, whirlpool, all screaming higher, seemingly without limits. skyrockets! what the heck is going on with these stocks? why aren't they marching to the markets tune? isn't that what happened in 2011, all the stocks kind of do one thing at the same time? each one of these has its own story. each is going up irrespective of the dow or the s&p. but they all have one thing in common. there are no sellers to speak of. there is no supply to be had. at least not yet at these levels. let me do something different tonight. something you never heard of. let me explain how these moves happen. i'm going to use my knowledge of institutional trading, meaning buying and selling big blocks of stock, because that's the only way this makes sense. see, unless you traded huge blocks of stock yourself, meaning 100,000 shares at a time or more, i ought to tell you,
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you have no idea what's behind these seemingly nutty moves today. i know you didn't, because i didn't understand how things worked until i found myself handling orders on the desk at goldman sachs. in fact, i had no idea how stocks moved up or down at all. before i got to goldman, i never bought more than a couple hundred shares at a time. put a market order in, get the report. simple. you couldn't move a stock up or down if your life depended on it with those orders. but when i got to the trading desk at goldman the first day, i helped handle an order -- okay, i answered a phone. where a client wanted to buy a million shares of diamond shamrock. at that time a major oil company. buy me a million shares of diamond shamrock. 27 top. 27 top. a million shares, 27 top? i hit the stock up. it was trading at 26. what the heck did he want to buy it at 27 for?
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why not buy it at 26 where it's offered? what a stooge, this guy is a stooge. so i turned to the real trader and said hey, eddie, this guy wants to buy one million shares, he wants to pay 27. he looked at me like i was a total moron. he was furious. i think he would have thrown the phone at me if it weren't tethered to the desk. it's not called buying, it's called taking! and second, he doesn't want to pay 27 for the stock, that's his top. that's what he's willing to pay if he has to. so i asked eddie, because i'm really stupid as plywood, why does he want to overpay when the stock is at 26? he explained to me something i never forgot. bozo, he said, because i wore my hair even more like bozo then. that price is only good for retail, for a couple thousand shares. if you want to get a million shares in, you've got to move the stock, and he doesn't want to pay more than a dollar above. he doesn't want to pay more than
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27 when he moves it with his own buying. that's how stocks move. they move because people move them. they move until they trade to what's known as supply. if there's no supply, meaning no one is willing to sell at this level, then the buyers move them up even more to where supply can be found. and that's what's behind these big moves today. so let's go over whirlpool. you may have seen this stock take off like a rocket when it reported its first good quarter in ages last week. you're thinking, wait a second, quarter couldn't have been that good, 16 points in four days? what's that about? first there are only 76 million shares of whirlpool. that sounds like a lot of shares, but it isn't. pfizer has 7.7 billion, microsoft has 8.4 billion shares. because whirlpool had been such
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a serial under performer, it became a targe for the short sellers. they already complained about -- listen to these alibis, we didn't know about lower housing, too much inventory, foreign dumping, soaring costs. nothing good ever seemed to be happening here to this job-like company. and there was even talk the dividend would be cut this time around. so going into the quarter, 10% of whirlpool's shares were sold short. huge percent of people thought this thing was going to blow up. but unlike all the previous quarters, this time whirlpool delivered a knockout punch to the shorts. it delivered big-time. plus they guided higher. totally fooling the sell side analysts from the brokerages who had to radically raise their estimates from this to this. now put yourself in the heads of whirlpool shareholders. if they hadn't been shaken out by this company's multiple misses by this time, they weren't going to sell at all, right? they're in through thick and thin. they had taken a ton of abuse,
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they weren't going to be dislodged at this point. they finally got what they wanted. but the short sellers -- boy, did they get it wrong. they got it way wrong. so let's say a bunch of them were short, say each 100,000 shares a piece. they can't just go to their broker and place an order and close the last sale. they have to go to guys like me when i was on the goldman desk and try desperately to get that order filled. pay up to cover their short positions. here is the dollar. cramer, i got 100,000 whirlpool to buy, take a 56 top. keep in mind, many of the other short sellers are at the same time doing this -- hey, johnson, get me 100,000 in, 56 top. same thing, all over the street. they're trying to contain the loss, contain their short sale loss. trying to cover it, bring it in. all over the street, brokers are getting that exact same call. i would immediately reach for whatever stock was out there, so would everyone else. next thing you know, it's at 56, 57, 58, as real buyers come in, as well as short-covers.
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suddenly the dividend is fine, company is doing better, housing is coming back. what happens then? oh, boy, you've got to go back to your buyer. and you say, look, i'm looking for sellers here, but i can't find any supply. there's none to speak of in the 50s. 50s? nothing. now the desperate buyer says do what you can. and you reply i need a new top. and the buyer is shaking, you can hear it in his voice. they're like -- okay, okay, all right, 61 top. and i might then go over my system. in other words, go out loud throughout the whole goldman sachs organization. i'm asking people, call your clients, see if anyone has any whirlpool for sale. when people hear they're big buyers, funny thing, they don't want to sell either. so with a 61 top, same problem. tons of buyers there, no supply to sate them. now the stock starts really getting away from the buyer. he's frantic, take it, just take it, take it to where the supply is! get it in! next thing you know, whirlpool
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is at 71, where it traded today. right now that same thing is happening all over the street. green mountain, netflix. because these like whirlpool are annuity shorts, multiple buyers of all three. all trying to get stock, but no supplies available. buyers have come back day after day and still can't find shares so they pay up even more. you cannot fathom these moves if you're thinking in terms of home gamers buying a couple hundred shares. these situations are what happens when investors turn swiftly from bear to bull on better than expected news. they're called short squeezes, because there isn't enough stock to satisfy the natural buyers in the many short covers. you could say they were flip-floppers, but believe me, they're fighting to save their firm's lives. when the move ends, that's the great mystery of trading. we want to say whirlpool will go to 80, but it's not like that. the bottom line, when you get a short squeeze, it's where she stops, nobody knows, except the buyers themselves who just won't quit until they brought their short positions in, because they were wrong and thus no longer have any edge. in other words, these moves have nothing to do with valuations,
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earnings, storage, nothing, nada. just a question of supply and demand. and as of today, the short-covering buyers haven't found enough supply to end their agony. maybe tomorrow will be a better day. rhonda in texas! rhonda! >> caller: hey, jim, a sunny texas boo-yah to you today. >> always like that. what's going on? >> caller: hey, jim, i love your arg principle, so on today's announcement from coin star partnering with verizon, does that mean a good up side for both of them? >> we got more than that. we got good earnings coin star, a tie up with ncr, competitor coin star and exactly what i'm talking about with these other stocks. we've got a genuine short squeeze. there is no supply. coinstar up 8. this stock has the ability to be up 12 tomorrow. that's right, 12 points. don't get caught short. understand the market. right now it's a matter of supply and demand. and today the shorts just don't have enough supply to fill their orders. are the companies doing better? it doesn't matter.
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"mad money" will be right back. coming up, at your request, all this week, cramer's checking his inbox and voice mail, and minding twitter to answer your best questions. tonight, caterpillar versus joy global. which one deserves to be lifted to new heights? and later, fraternal stocks? two companies in the same sector. but with different trajectories. both are luxury brands. but one's business is running as smooth as its leather bags. and the other as rough as uncut diamonds. why? cramer is getting to the bottom of it. plus, money ball? baseball great curt schilling has moved from the diamond to the boardroom. but can his video game venture with electronic arts hit a home run? cramer sits down with the all-star to see how this game is played. all coming up, on "mad money." [ male announcer ] what if we told you that cadillac
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welcome to "mad money" all-request week. i'm jim cramer, your host. i'll be answering questions you send in via e-mail and twitter @jimcramer all week long. today's request comes from cube1us who tweeted we should do a bakeoff between joy global and caterpillar. i think it's a great idea, so done your way, my friend. caterpillar is, of course, the largest manufacturer of construction and mining equipment on earth. but back in november of 2010, they acquired a company called bucyrus international. which along with joy global was one of the two top players in the mining equipment business, especially coal mining. so now cat and joy are head-to-head competitors.
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with joy global being a smaller pure play on mining equipment. don't get me wrong, though. this is a battle of two heavyweight industrials, the stock equivalent of the rumble in the jungle. which of these is muhammad ali, the greatest of all time, goat, and which one is joe frazier, throwing in the towel? both joy global and caterpillar have been run substantially since the beginning of the year. so i've got to tell you, i am not a buyer. that's not the reason we're doing this exercise. we are doing the request hour. because i feel very strongly that everybody here deserves the ability to be able to discern between stocks for when the time is right. i think caterpillar is better than joy global. but once again, i'm not saying buy cat right here, and it's the kind of stock that belongs on your shopping list, so you can
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pick some up the next time the market gets hit and drags everything down. i like cat for 30 or 40 points, but if you think the exercise is cramer saying buy cat tomorrow, that's the not point. what makes cat the winner of this death match? i'm going let you in on the method of my madness and how i would have done this exercise at my own hedge fund. it's a valuable drill and one you should have in your playbook. if you looked at the valuations, you would think joy global is the better bet, because it sells for 11.5 times earnings and has an 18.7% growth rate, meaning it has a peg ratio of .61. it's trading at far less than one times growth and normally i consider any high-quality company with a stock that cheap to be a terrific bargain. even after they run -- >> buy, buy, buy! >> caterpillar on the other hand, sells for ten times earnings with a 4% growth rate, still a super inexpensive peg of less than 1.88. but it is more pricey if you look in that particular prism, than joy global.
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however, i would argue that cat deserves to trade at a premium to joy global for a variety of reasons. and this is how you really get into the nitty-gritty of how to pick stocks. some of this comes down to pure diversification. caterpillar has got a diversified portfolio of machinery. joy global doesn't. see, cat serves many more end markets than joy global. it's a play on all kinds of infrastructure being built all over the globe. joy global only makes mining equipment, and even there, 66% of revenues are coal related. i've got to tell you, that means joy global is inherently more risky to me, especially since natural gas prices are so low in the u.s., it's giving coal a run for its money as a fuel for power generation. it's true that china has a voracious appetite for coal. that cuts in joy global's way. but china hit the brakes last year, and the near-term outlook for coal is muted, something we heard from peabody energy, the largest coal producer out there. that said, i do not want to
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underestimate china, because the chinese still can't get their hands on enough coal. they burn 3.7 million tons a year, three-and-a-half times what we use. and that figure is going much higher. that demand should be enough to fuel joy global for years to come, which is why i do like the stock. however, caterpillar is still a play. remember, the whole reason they need coal is their massive infrastructure buildout as people move from rural areas to cities. right now china doesn't have the roads, the trains, the general infrastructure to support its needs. and caterpillar sells the equipment that will allow them to build out all of this stuff. okay, how about europe, because you've got to go geographically. caterpillar has very positive things to say about its european business on a conference call and they expect machine sales over there to be at or above last year's levels thanks to a big replacement cycle. need new trucks, need new caterpillar, new earth-movers. for joy global, though, europe is a negative. european utilities, they are gripped with green in europe and
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phasing out coal. next you need to consider the competition. cat's competing with the likes of komatsu and kubota, two japanese companies being hobbled by the strong end. you saw the numbers from panasonic, sony, might as well be kubota and komatsu. the only real competitor, and here is the big problem, caterpillar. yeah. that's a big problem. in the old days before cat bought bucyrus, joy global was evenly matched with its chief rival. but now that cat owns bucyrus, i think it's hard for them to compete against their size and scale. caterpillar works with nearly 200 dealers across the globe. customers love their service network. it keeps equipment online while projects are underway. they are well-known for their service. so when cat decides to ramp bucyrus with its distribution network, i think it will be a blow to joy global. and then there is the guidance. this is often the most important thing when it comes to owning a cyclical company.
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caterpillar's guidance was upbeat. after delivering a blowout, better than expected quarter, the company gave upside guidance for 2012 and raised their revenue forecast, extremely bullish. joy global, more subdued. it gave inline guidance for 2012. although it has to be said their management team, which i love, is always conservative and the company's backlog is still at record levels. we also know caterpillar hasn't levered this bucyrus acquisition at all. i was worried caterpillar was going to get hit because they kept bucyrus in the shadows. bucyrus going from money loser to money maker this year, i think that whenever they're ready, cat can accelerate bucyrus and put a beatdown on joy global.
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cat will ride any upturn in our economy thanks to diversification. joy global is still behind the eight ball domestically, if only because of the obama administration's hatred of dirty coal, as well as the low price of natural gas hurting the domestic coal biz. here's a real key thing. remember we spoke to dominion the other day, talked about the election? if you think obama is going to win a second term, you can bet the epa will force the dirtiest coal plants to be closed, causing an even quicker shift to natural gas and hurting joy global more. some people think joy global has a big edge in the takeover department. unlike cat, it's small enough to be acquired. however, i got to tell you, i don't see it. joy global is still large enough -- it would be a tough pill to swallow and i don't see any potential suitors that make sense, especially since komatsu doesn't plan any large acquisitions. there is always a chance. so the bottom line. i think these are two great companies, and i'm glad that a
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viewer called out and asked us to compare them. but the big problem for joy global is caterpillar. before cat bought bucyrus, i might have said joy global is a better stock. now cat can use its financing arm and service division to outshine joy global on its home turf. to be very clear, they have just run too much, both of them. but cat is the one that deserves to be on your stock shopping list for the next time this market gets hit and hit hard. once again, i urge you to tweet us @jimcramer #madtweets or call us to get your requests answered as exercises like joy versus cat are central to understanding why one stock is better than the other. and it is request week all week here on "mad money." after the break, i'll try to make you some more money. coming up, fraternal stocks? two companies in the same
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sector but with different trajectories. both are luxury brands but one business is running as smooth as its leather bags, and the other as rough as uncut diamonds. why? cramer is getting to the bottom of it. and later, money ball? baseball great curt schilling has moved from the diamond to the boardroom. but can his video game venture hit a home run? cramer sits down with the all-star to see how this game is played. all coming up on "mad money."
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♪ hey, every time earnings season rolls around, we're presented with all kinds of conundrums, results that don't seem to add up. companies that you think would be very similar produce wildly divergent quarters. stocks in the same sector moving in opposite directions when it seems like they should be trading in lockstep. in other words, pure confusion. or at least that's how it looks on the surface. let me give you one very blatant example. coach -- don't you love this look, versus tiffany. here we have two high-end
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retailers, both plays on conspicuous consumption. yet coach is nickels away from its 52-week high, while tiffany is languishing 10 bucks above its low. you would expect these stocks to trade together, right? this high end stuff people are talking about. very similar customer bases, don't they? and although coach makes handbags and accessories while tiffany's is all about diamonds and jewelry, they're both selling expensive objects that nobody needs. yet coach is kicking butt all over town, like the new york giants. but tiffany didn't even make it to the super bowl. i was going to say it was like the patriots. but even if their error laden performance last night, that comparison would be unfair to new england, because coach bill belichick normally runs a great outfit. get me his tailor, please, i need a makeover. understanding why one wins while the other loses is crucial to the process of picking stocks. it's how i'm going to teach you tonight. you have to know how to pick winners.
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and to do that, you need to know what separates a winner like coach from a loser like tiffany. so let's drill down. back on january 10th, tiffany lowered their earnings guidance, fiscal fourth quarter results will be out in may, in part because business was lousy over the holidays. same store sales rose just 4%. analysts were looking for a high single digit increase. the numbers? just plain ugly. enough to make you think that rich people have stopped buying things here in this country. especially the kind of high-priced luxury goods that are tiffany's stock and trade. except we know that's not true. the rich are opening their wallets and spending like crazy. something we talked about all last week. and that's also been borne out by the results at coach, which reported a stellar quarter back on january 24th. handily beating the estimates, and providing positive commentary about the business going forward, in large part, thanks to a terrific holiday
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season. as a result, coach is now around 19% year-to-date. tiffany would be killing you. tiffany is down 2% for 2012. dramatically lagging the s&p 500, up nearly 7% for the year. so what the heck gives here? how do you explain this divergence into two names that are so similar, both luxury brands with aspirational price points, both of which have a strong u.s. base, get about 20% of their sales from japan, and have powerful chinese growth prospects? are people buying handbags but not bracelets? is that what's going on? they're not getting engagement rings anymore? have diamonds suddenly gone out of style? or could it be these two companies aren't as similar as they seem at first glance? when you look at them more closely, it turns out that tiffany has a much narrower customer base than coach. see, tiffany is much more levered or geared to wall street bonuses. and those were gutted last year. with the layoffs and reduced compensation coming from
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financial firms, one of the reasons why we recommended morgan stanley last week, tiffany's core customer has been taken to the wood shed. that's why the company called out weakness at its store on fifth avenue in new york, and also talked about how weakness in the northeast and mid atlantic states spread across the entire country. coach, on the other hand, has a far more diverse group of customers. the majority of their u.s. retail business is at outlet centers, not exactly what you think of as high-end. and about half the handbags the company sells in north america are at price points beneath $300. coach is an aspirational brand that caters to more than just the super wealthy. in other words, you don't need a huge hedge fund bonus to shop there, as lots of middle class people are buying coach handbags, too. plus, the company dominates its category, commanding 29% of the premium handbag and accessory market. tiffany doesn't come close to that in jewelry. they do have some items that cost less than $300, but most of the spending at tiffany comes
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from their wedding product lines, as well as high-end fine jewelry, real expensive stuff. but the divergence isn't about where these companies are now, it's about their ability to expand in the future. and the truth is, coach has a lot more avenues for growth going forward than tiffany does. for example, coach is making a big move into selling products for men. belts, wallets, messenger bags that are very popular in asia and so forth. a gigantic category that should account for a quarter of the company's growth over the next several years. by contrast, tiffany's really doesn't have much of a men's strategy. hard to see how they could. they might be able to double down on the market for bling. but that doesn't exactly go with the tiffany brand. then their geographic considerations. tiffany gets 12% of its sales from europe and we know how tough things are over there. coach -- wow, is this lucky? better to be lucky than good. virtually no sales in europe. 1% of their business. both with roughly the same exposure to japan.
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region pretty much flat lining right now. let's not forget china, which both of these companies are taking by storm. right now tiffany gets 18% of its sales from the people's republic. coach only gets 4%. i think coach is the better china play because their opportunity is bigger. coach should be able to grow to $1 billion by 2015. that's not far from now. tiffany, on the other hand, has trouble keeping up with its early momentum in china. also, tiffany's getting pounded here by high prices of gold and silver, not to mention the diamonds themselves. remember, everything they sell is set in silver or gold or platinum. this has been a big problem for jewelers everywhere. so tiffany's costs are higher and they can't pass the costs on to customers because then they lose even more traffic. at the same time, tiffany doesn't discount. something that really hurt them in an environment where shoppers -- hey, look, shoppers, they're looking for deals. so tiffany's gross margin, what they make after the cost of sales, is declining. down to just under 58% as of the most recent quarter. coach, meanwhile, has industry leading margins.
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their gross margins came in at 72% in the latest quarter and it's going higher. so it's no wonder coach is pantsing tiffany. what to do with them now? even after coach's recent run, both stocks are still selling, i think, for a reasonable -- in the case of coach, 19 times earnings. which means coach is a much better buy, especially since it has a higher growth rate. here's the bottom line. individual stock-picking is back in style in 2012, which is why i'm doing these exercises, like coach versus tiffany, because that's the fun this year. that means you need to be able to understand what makes some companies winners, while others in the same sector are losers. right now, coach is a total winner. i think it's a buy on any pullback, but i would stay the heck away from tiffany, unless gold and silver plummet and bonuses come roaring back, neither of which i believe is in the cards any time soon. let's go to matt in new york. matt. >> caller: hi, jim. i was wondering what you think of harry winston diamonds. i know they had a setback in the
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last quarter because of poor sales. >> yeah. >> caller: rough diamonds, largely due to difficulty borrowing from european banks by their customers in the bric countries. also because tiffany, their largest customer, gave negative guidance. however, their retail sales of precious gems, especially engagement rings, are doing really well. they're opening new stores. and their watch business is doing okay, well not quite as well as they hoped. >> it's not doing that great. there was a period where i said you know what, we've got to go after everything that's high-end. they do not have the earnings. they do not have the earnings to recommend that stock. i do not think that that's a good stock. and you know what? that is the kind of company that i think a lot of people think has got to be great, because people are spending money and getting wealthier. it's not applying to them. brad in california. brad. >> caller: hey, jim. super bowl greetings from beautiful so cal. now we can concentrate on
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dodger baseball. i have a twofold retail question for you. i trade out macy's almost daily and with this stellar part of the report probably coming our way next week, how should that be played, and how do you compare nordstroms? >> this is hard. because remember macy's guided up when they reported which means i think they may have stolen from the up side. however, macy's has more momentum than nordstroms. i want to stick with macy's. the stock is a terrific buy. needless to say, a remarkable job. anthony in maryland. anthony. >> caller: hey, a big boo-yah to you, jim. my question to you is, when will the demand for silver overtake the manipulation of the metal? >> no, no, no. silver is a poor man's gold. this weekend, twice guys asked me about silver. it's like, jim, when is silver coming back? listen to me, silver is a poor man's gold. the gld is what i want you in. i do not want you in silver. and i definitely don't want you in the silver miners. can i be more clear?
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i don't think so. look, it may not be about the money-money, but if you pit tiffany against coach, i've got to tell you, coach is the winner. tiffany? what can i say? does make some -- for a pretty good get-up, though. stay with cramer. coming up, ride the lightning. take a nonstop thrill ride, as cramer goes stock after stock. all your calls taken rapid-fire on the "lightning round." and later, money ball? baseball great curt schilling has moved from the diamond to the boardroom. but can his video game venture with electronic arts hit a home run? cramer sits down with the all-star to see how this game is played. all coming up on "mad money." this new at&t 4g lte is fast.
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it is time! it is time for the "lightning round" on cramer's "mad money." you say the name of the stock and i tell you whether to buy or sell. when you hear this sound, the lightning round is over.
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are you ready, skeedaddy? time for the "lightning round" on cramer's "mad money." lenny in ohio. >> caller: hey, a big b-b-b- buckeye boo-yah to ya. i bought bidu third week of january, anticipating earnings being released, and moved it back to the middle of february. and i'm wondering if i should buy, sell or hold? >> that's the only chinese stock i like. i've been wanting to recommend sohu. sorry. doris in michigan. >> caller: jim, i understand they're based out of bermuda to offshore drilling. >> offshore drilling is where to be. i like schlumberger and ensco, actionalertsplus.com names. jerry. >> caller: boo-yah from beautiful richfield, connecticut. >> beautiful. what's on your mind? >> caller: i love this small cap semi conductor stock, the
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company is flotronics. >> it is a good company. i'm going to put it in the speculative category. while i'm at it may i say, mx right here. they have a big day. you are now on your own. i want you to sell, sell, sell mx. mickey in georgia. mickey. >> caller: hey, jim, a major league new york giant boo-yah. >> congratulations to all our giant friends, boo-yah. what's up? >> caller: you got it. listen, everybody is a fan of apple. i want to know about one of their major suppliers, cirrus logic. >> the stock traded down after. i don't want to play other than broadcom and qualcomm. you want to play apple, guess what, buy apple. let's go to ron in virginia. ron. >> caller: hi, jim. appreciate your show. >> thank you. >> caller: especially your
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subdued voice on the republican debate. i like your take on general mills, gis. >> general mills, i never go against the general. consistent cash flow, good dividend, doing a great job. not going to set the world on fire, but an excellent stock to have. let's go to paul in texas. paul. >> caller: boo-yah, jim. >> boo-yah. >> caller: bred, born and raised in hazelton, pennsylvania. like you, 66 years old. >> well, until the end of the week. what's on your mind? >> caller: i got to get this in. if you want to make money, learn, have some fun and stick with cramer. that's cramer with a c. >> that's nice. thank you. thank you very much. >> caller: okay. i got a stock, vvus. >> anti obesity, very speculative, but i am going to endorse it. understand, with a speculative stock like this, you can lose a lot, and make a lot. as long as you recognize that, i can bless it in your portfolio. and that, ladies and gentlemen, is the conclusion of the "lightning round"! the "lightning round" is sponsored by td ameritrade.
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in what passes for common sense. used to be we socked money away and expected it to grow. then the world changed... and the common sense of retirement planning became anything but common. fortunately, td ameritrade's investment consultants can help you build a plan that fits your life. take control by opening a new account or rolling over an old 401(k) today, and we'll throw in up to $600. how's that for common sense? big treat, guys. got a chance to talk to one of my all-time heroes, curt
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schilling, six time all star pitcher who helped lead the phillies to the world series in '93 and then won three world series championships, first with the diamondbacks, then breaking the curse of the bambino with the sox in 2004 and again in 2007. schilling retired with a postseason record of 11 and 2. his buddy from the 2004 american league playoffs already in the hall of fame. shoe-in on the ballot in 2013. curt's wife has written a best-selling book about raising autistic children. truly one of the business stories of all-time. unlike some ball players who buy a car wash or become casino greeters, schilling decided to do something a lot more interesting. he started a video game company, 38 studios, and their first title being published by electronic arts, ea, hits the shelves tomorrow, called "kings of amalur."
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it's a highly immersive genre that requires a major time commitment from players. but when they're successful, well, these games can make boat loads of money, and this could be a very big hit. ea actually called it out on their latest conference call as one of the most hotly anticipated games of the year. and you know that stock is taking off since they gave guidance. schilling dominated the opposition. and i bet he will do the same with this new game. don't take it from me. let's hear from the man himself, curt schilling, baseball legend and founder and chairman of 38 studios. mr. schilling, welcome to "mad money." >> thank you. >> good to see you. >> good to see you. >> people don't seem to understand, they don't get it. gaming is a huge, huge business in this country. >> i mean, gaming is the entertainment choice for an entire generation now. it is what we do. it's how we're connected. facebook is the new street corner. and consoles are the new hangout place. and i -- we're raising four kids, my wife shonda and i, 16, 14, 12 and 9 so we're on the leading edge of seeing that. >> this is a company where you're putting a lot of people to work. this is a major capitalist enterprise for you. >> it absolutely is. we've got 400 jobs in the studio
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between the baltimore and providence studio. we're growing. it's an opening day 2.0 for me in a sense. and i'm as nervous as i've ever been or ever was during my baseball career, because i don't have the ball now, it's out of my hands and the rubber is going to meet the road. but we're unbelievably confident in what we do. and when you understand it's always about people -- we knew a long time ago we had something incredible. >> now, a lot of people would say, why isn't this game about baseball? others would say, knowing your history, because i know things that you've written, i've written in magazines you have that you're a world war ii -- let's just say you know more about it than most people. but this is not those, right? this is totally different. >> no, you know what, because it's a passion play. i wanted to do something i was unbelievably passionate about. i played baseball for 23 years professionally and the rest of my life before that. i wanted to immerse myself in something that i don't think a lot of people gave me good odds to win at. and i wanted to be the best in
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the world at it, so it had to be something i'm fully committed to. >> explain to me what you do at 38 studios. and what is the division of labor there? >> i do a lot less from a creative perspective than i used to, because i got really smart people that told me to shut up. which i think the sign of any good leader is probably as much about knowing what you don't know as what you do. this is about -- i've created something very special. 38 studios is not a place to work, it's a place to belong. and when you can impart that on people, 23, 24, 25-year-old kids, and they understand it and buy into the team concept, that's when you back away. so my job now is to preserve and protect the culture we have created in the company. >> now, you decided to go rpg. you're not going social. we talk a lot on the network about zynga. we talk a lot about facebook. you will not be part of that operation. >> you know what, this is not a money play. >> wait. >> here's the thing. i'll be here a couple years from now doing a multibillion-dollar ipo because we have done what we know we're good at. we are doing what we know we can do and execute on. and we're going to be -- the goal is to be better than anybody in the world at doing
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that. so it doesn't make a lot of sense to have ari salvatore, a 26-year-old author, tom macfarlane, these guys who made fantasy for three decades, wouldn't make sense to bring them in and do a facebook game. >> right. how about the tie-in with electronic arts? how did that come together? >> electronic arts -- i have known a couple gentlemen at the company for quite a few years, mentors to me, peter morris and jim banes, and peter demartin. and i always tried to find out and talk to and be around people that are the best at what they do to find out what makes them great. and we had multiple conversations because we're building a second project called project copernicus. we picked up this studio in baltimore, and reckoning was in the works, technically speaking. and we took our ip. and when you think about our amalur, which is the universe we're in, think of lord of the rings, middle earth, franchise property. we wanted to introduce it to the world, and who better with a global reach from a marketing
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and pr perspective than ea? so it was a natural fit for us. we got them to believe in us early on and they committed to bringing us to market. >> do you see this being -- can it go into the movies too? >> absolutely. >> your own world, right? >> the 10,000 years of back story to our world is not just in say, only. it's fleshed out. it's huge. it's deep. comic books, toys, movies, ipad, iphone. you know, all of the things you can imagine around a successful ip is there. >> and it's also available on x box. >> x box, playstation, pc, launching at midnight tonight. again, incredibly exhilarating and terrifying at the same time. but across all platforms an incredible player experience. >> i've got to ask you, because you're a sports guy, super bowl last night, what did you think? >> up until the last four minutes, kind of meh. and then it became what super bowls become. and i think eli manning became not peyton's little brother anymore. the best team won. >> did you ever play any ea sports games?
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>> huge madden fan, huge nhl -- i never played baseball, i did for a living. i said when they can make a game as hard as the real thing, i'll have a interest. selected game stops, midnight tonight. >> i am recommending ea stock and i think you're going to help make the quarter. >> thank you. >> honored that you're here. curt schilling, former major league pitcher. founder and chairman of 38 studios. watch this game. it is very quickly going to the top of the charts. stay with cramer. [ male announcer ] succeeding in today's market requires decisive action.
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saw a lot of commercials during the super bowl last night. they were all cute, funny dogs, mischievous babies, loveable polar bears. stupid ones, too, like that insulting demeaning of women by the go daddy thing. or something about a kid leaping himself into a pool. but there was one ad that struck me as the most honest, most riveting and most compelling of them all. see, if the game just ended and raymond berry ran the giant gauntlet with the lombardi trophy. suddenly it seemed like every other player for the giants was pulling out an iphone to snap pictures of the moment. one after another after another. and i said to myself, there it is. not some pet dangling on a bag of chips, headlights-killing vampires, king elton getting trapdoored. of course it wasn't an actual advertisement at all. it was just a collection of the coolest, most idolized athletes
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in the world, whipping out their favorite device, which they had on the field, ready for action, for free! this week i debated doingg a series about the commercials, and the stocks right here on "mad money." just as an attempt to put the commercials in perspective, use them as a training tool, coke versus pepsi. in the end, it didn't matter. to me the endorsement of apple by real athletes who weren't being paid, especially contrasted with a gm corvette that eli manning didn't seem to care about, eli, the keys! don't forget the keys! that said it all. the stock still reacting to what i regard as the best quarter of the whole earnings period. there is ample reason it can keep trading higher. especially considering the company can earn $50 a share. darn thing is only selling for seven times earnings. what matters to me is that when everyone else is paying $3.5 million per commercial, apple paid nothing. and easily had the best ad of all. stick with cramer.
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brian schactman was out in north dakota this us this summer when we did our show there. he has a special you have to tune into tonight at 9:00 and midnight eastern.

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